Notes/Observations
Macron handily wins the French Presidential election as its European allies’ breathe sigh of relief
European Sentix Confidence at highest level since July 2007 aided by decrease in political uncertainties in the euro zone
China’s forex reserves rose for the third month in a row in April, signaling eased capital flight pressure.
Overnight:
Asia:
China Apr Trade Balance registers a slightly bigger surplus ($38.1B v $35.2Be) as both exports and imports underwhelm
China Apr Foreign Reserves climb to a 5-month high as its registered its 3rd straight monthly increase ($3.030T V $3.020Te (**Note: Data saw its 1st three-month rising streak since mid-2014)
Japan/China said to have agreed on need to deepen cooperation in finance and collaboration on trade and investment
sidelines of Asian Development Bank’s annual meeting
Europe:
France’s Macron defeats Le Pen in French Presidential Elections (66% to 34%); Turnout was the lowest since 1969
Chancellor Merkel’s Christian Democrats (CDU) defeated the Social Democrats in the Schleswig-Holstein state elections; margin 33% to 26%
German Emnid Poll: Merkel’s Conservative coalition extends lead in upcoming Sept elections (- CDU/CSU 36% ; SPD 28%
German Chancellor Merkel said to have expressed her dissatisfaction with EU Commission President Juncker over his Apr 26th dinner with UK PM May and Brexit-related talks
Germany said to consider proposing giving Britain access to single market in return for a fee
PM May said to accuse Juncker of hardening stance on Brexit . Must end threats designed to influence outcome of upcoming snap elections. PM said to consider publishing hard Brexit plans in event EU talks break down
UK Home Sec Rudd: EU President Tusk held very hostile briefings against PM May after April 26th dinner in deliberate attempt to influence voters Sovereign rating (Friday)
Fitch affirmed United Kingdom sovereign rating at AA; outlook Negative
S&P affirmed Italy BBB- sovereign ratings; outlook stable
S&P affirmed Turkey BB sovereign ratings; outlook negative
Canadian rating agency DBRS affirmed Norway sovereign rating at AAA, stable trend
Americas:
Fed’s Bullard (non-voter, dovish): wants Fed to start trimming balance sheet in H2 this year; Fed has waited too long to reduce balance sheet
Fed’s Williams (moderate, non-voter): We’ll be normalizing the balance sheet sometime in the future; it makes sense to start unwinding the balance sheet later
Fed’s Rosengren (moderate, non-voter): Fed will hit zero rates more often in the future; it’s inevitable the Fed will need to expand balance sheet again in future. Reiterated preference is to cut balance sheet gradually and relatively soon
Energy:
Saudi Oil Min Al-Falih: OPEC cuts could extend beyond H2 of 2017; Not concerned with oil demand peaking any time soon
Economic Data
(JP) Japan Apr Consumer Confidence: 43.2 v 43.2
(DE) Germany Mar Factory Orders M/M: 1.0% v 0.7%e; Y/Y: 2.4% v 2.1%e
(NO) Norway Mar Industrial Production M/M: -0.1% v -0.6% prior; Y/Y: 1.0% v 1.2% prior
(NO) Norway Mar Manufacturing Production M/M: -1.1% v 0.5%e; Y/Y: -3.3% v -1.4% prior
(SE) Sweden May Housing Price Indicator: 69 v 67 prior
(TR) Turkey Mar Industrial Production M/M: 1.3% v 0.8%e; Y/Y: 2.8% v 2.5%e
(CN) China Q1 Preliminary Current Account: $19.0B v $11.8B prior
(UK) Apr Halifax House Prices M/M: -0.1% v +0.1%e; 3M/Y: 3.6%e v 3.8% prior
(SE) Sweden Apr Budget Balance (SEK): +4.3B v -9.1B prior
(TW) Taiwan Apr Trade Balance: $2.8B v $4.0Be, Exports Y/Y: +9.4% v +10.9%e, Imports Y/Y: +23.5% v +18.0%e
(EU) Euro Zone Apr Sentix Investor Confidence: 27.4 v 25.2e (highest since July 2007)
Fixed Income Issuance:
None seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 -0.5% at 3642, FTSE flat at 7297, DAX -0.3% at 12676, CAC-40 -0.7% at 5393, IBEX-35 -0.4% at 11096, FTSE MIB -0.5% at 21376, SMI -0.3% at 8994, S&P 500 Futures %]
Market Focal Points/Key Themes European Equities trade largely lower on profit taking following the expected victory for Macron in the French election. The CAC leads the decliners down 0.6%, with the FTSE slightly higher. Shares of Centrica and Akzo Nobel down in early trade, with Akzo Nobel rejecting the 3rd increased offer from PPG, and Centrica said its on course to hit 2017 targets. French Banks are giving back some ground following the strong run up to the elections with shares of SocGen a notable decliner. Earnings will continue to dominate the corporate calender in the US today with notable earners including AES Corp, Mallinckrodt and Tyson Foods.
Equities
Consumer discretionary [Premier Foods [PFD.UK] +1.7% (Renews relationship with Mondelez)]
Materials: [Akzo Nobel [AKZA.NL] -2.2% (Rejects PPG offer),]
Industrials: [Hamburger Hafen Und Logistik [HHFA.DE] +6.1% (Raises outlook), Volkswagen [VOW3.DE] +0.1% (Royal Enfield approach for Ducati), Post NL [POST.NL] -8.2% (Earnings)]
Financials: [SocGen [GLE.FR] -2.9% (Profit taking)]
Telecom: [QSC [QSC.DE} +9.7% (Earnings)]
Energy: [Centrica [CNA.UK] -0.3% (Trading update)]
Speakers
ECB’s Mersch (Luxembourg) reiterated Euro-area recovery was gathering momentum with confirmation of a broadly balanced risk outlook for growth was within reach. Saw timid signs of early pipeline inflation pressure
Moody’s: President’s Macron policy platform is credit positive for France. Outcome of France’s legislative elections in June would be crucial in determining whether the new president was able to achieve his policy plans
China FX Regulator SAFE noted that the current account surplus was within a reasonable range and the balance of payments basically balanced in Q1 back by sound economy. Economic growth is more stable
China govt reportedly considering merging 8 companies into 3 larger power companies
FX Regulator SAFE’s Pan: Reiterated view that govt to keep CNY currency (Yuan) value basically stable at a reasonable level. To further increase Yuan rate flexibility
Russia Energy Ministry: Extension of OPEC deal would accelerate market rebalancing; would support extending OPEC cuts beyond 2017. Reiterated Russian/OPEC efforts have been very effective
Currencies
The session in Asia initially saw risk-on appetite as EUR/USD tested above 1.10 level for its highest reading since early Nov as the political uncertainties in the euro zone decreased.
The European morning saw the Euro give up gains after centrist Emmanuel Macron’s victory over the far-right Marine Le Pen in France’s presidential elections.
South Korean KRW currency (won) was firmer ahead of presidential elections on Tuesday as leading liberal candidate Moon Jae-in seen likely to emerge victorious
Commodity prices also bounced back on the potential OPEC cut in oil production helping the AUD hold steady.
Fixed Income
Bund futurestrade at 160.63 up 25 ticks but off the highs following the cash open. A break of 160.40 support level could see lows target 159.60 followed by 159.01. Resistance remains near the 161.88 level followed by 163.54.
Gilt futurestrade at 127.81 lower by 9 ticks, after initially bouncing higher on the open. A continuation of the pullback from the 129.14 April 18th high has price eyeing the 127.50 support level. An acceleration lower could test the 126.62 region. Resistance stands at 128.49 then 128.81 followed by 129.14.
Monday’s liquidity report showed Friday’s excess liquidity rose to €1.650T a gain of €1B from €1.649T prior. Use of the marginal lending facility dropped to €296M from €340M prior.
Corporate issuance saw $39.0B issued last week, well ahead of last week’s forecast of $25B. For the week ahead, analysts eye issuance to come in around $35B.
In Euro denominated issuance €9.7B came to market last week via 20 issuers and 21 tranches.
Looking Ahead
(MX) Mexico Apr Vehicle Production: No est v 363.7K prior; Vehicle Exports: No est v 297.6K prior
05:30 (DE) Germany to sell €2.0B in 6-month BuBills – 06:45 (US) Daily Libor Fixing
07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
07:00 (CL) Chile Apr CPI M/M: 0.2%e v 0.4% prior; Y/Y: 2.7%e v 2.7% prior
07:00 (CL) Chile Apr CPI Ex Food and Energy M/M: 0.3%e v 0.4% prior; Y/Y: No est v 2.2% prior
07:25 (BR) Brazil Central Bank Weekly Economists Survey
07:30 (CL) Chile Apr Trade Balance: $0.5Be v $0.3B prior; Total Exports: $4.8Be v $5.5B prior; Total Imports: $4.4Be v $5.2B prior; Copper Exports: No est v $2.3B prior
07:30 (CL) Chile Apr International Reserves: No est v $39.0B prior
08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming actions in week
08:15 (CA) Canada Apr Annualized Housing Starts: 215.0Ke v 253.7K prior
08:15 (UK) Baltic Dry Bulk Index – 08:30 (US) Fed’s Bullard (non-voter, dovish)
08:45 (US) Fed’s Mester (hawkish, non-voter)
08:50 (FR) France Debt Agency (AFT) to sell combined €5.2-6.4B in 3-month, 6-month and 12-month BTF Bills
09:00 (MX) Mexico Apr Consumer Confidence: 82.5e v 81.0 prior
09:30 (EU) ECB announces Covered-Bond Purchases
09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
10:00 (US) Apr Labor Market Conditions Index Change: 1.0e v 0.4 prior
11:30 (US) Treasury to sell 3-Month and 6-month Bills
16:00 (US) Weekly Crop Progress Report
